Verizon Communications Inc. VZ is benefiting from strong free cash flow growth. In the second quarter of 2026, Verizon generated $6.4 billion of free cash flow, up 24.4% year over year. It was one of the strongest quarterly cash flow performances.
Strong free cash flow is supported by improving profitability. Adjusted EBITDA increased 7.2% year over year to $13.7 billion in the second quarter, while the adjusted EBITDA margin expanded to 40.1% from 37.1% a year ago. Verizon’s strategy to improve customer acquisition and retention economics while reducing costs is boosting operating leverage and driving cash flow.
Verizon's ongoing transformation program is another potential source of cash flow improvement. Management said the company remains on track to achieve at least $9 billion of operating and capital expenditure savings. Backed by strong first-half performance, Verizon has increased its expectations for full-year free cash flow growth. Management now expects 9-10% year-over-year free cash flow growth in 2026, compared with its earlier outlook of approximately 7%.
The company expects increased AI infrastructure-related revenues in 2027. Better customer economics and cost efficiencies will continue to drive cash flow for Verizon. However, despite the improvements, Verizon's free cash flow trajectory remains closely linked to its investment requirements. The company is continuing to fund fiber expansion and wireless network upgrades. The key question is whether the structural improvements can offset Verizon's substantial capital needs and support free cash flow growth in the near term.
How Are Competitors Faring?
Verizon faces competition from AT&T, Inc. T and T-Mobile, US, Inc. TMUS in the telecommunications space. AT&T generated $4.7 billion of free cash flow in the second quarter of 2026, up from $4.4 billion a year earlier. Operating cash flow increased to $10.8 billion from $9.8 billion, while capital expenditures rose to $5.7 billion from $4.9 billion. AT&T benefited from lower cash tax payments and working-capital timing.
T-Mobile reported $4.8 billion of Adjusted Free Cash Flow in the second quarter of 2026, representing a 4% year-over-year increase. Operating cash flow rose 7% to $7.5 billion, while cash purchases of property and equipment increased 13% to $2.7 billion. T-Mobile also witnessed higher capital spending during the quarter.
VZ’s Price Performance, Valuation & Estimates
Verizon shares have gained 11.5% over the past year compared with the industry’s growth of 97.5%.
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From a valuation standpoint, Verizon trades at a forward price-to-earnings ratio of 9.21, significantly below the industry average of 38.35.
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Earnings estimates for 2026 have increased 1% to $5.03 per share, while the same for 2027 have risen 0.2% to $5.29 over the past 60 days.
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Verizon stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).